FAQ’s
Why use a Mortgage Broker instead of a Bank
Mortgage Privileges (pre-payment etc)
What is my penalty if I sell/refinance before my term is up
How to use your RRSP’s as your down payment
Why use a Mortgage Broker instead of a Bank
Mortgage Brokers can often approve clients who were declined from the bank because of the wide range of lenders that they have access to as well as secondary mortgage lenders who will take riskier clients at a higher interest rate. Mortgage Brokers also know how to present a deal to a lender in the proper fassion rather than just submitting a pile of documents for the lender to shuffle through. By doing this, the lender quickly understands the strengths of the deal and are often given reasons behind any weaknesses to the deal by the mortgage broker resulting in more approvals and quicker approvals. Mortgage brokers also have equally discounted rates and can often beat the lenders best rate. When a mortgage broker has a client that is declined by one lender, they can quickly flip the deal over to a second lender without requiring the client to do any work what so ever.
Another minor benefit to working with a broker is that you are always given direct contact information and can easily contact them for quick tips regarding the mortgage market. A broker always has less clients than the bank so this also allows for more time allocated to each client.
Mortgage Privileges (pre-payment etc.)”
Mortgages almost always come with some pre payment privilages. These are often not fully understood by the client and can be very useful. The first and most important one is that even on a closed mortgage you can pay lump sum payments onto your mortgage without any penalty. A common ammount is 20% of the origional balance of the mortgage. This is a great feature because it allows you to pick a high amortization for your mortgage without being forced to spend 35 years paying off the mortgage. You can choose to have your mortgage amortized over 35 years to keep payments very low but any time you have access to extra money you can throw it on your mortgage to shorten the amortization. As long as your required payments are lower then you have much stronger purchasing power if you wish to buy another property.
Other privilages that offer the abilty to pay your mortage faster without penalty are the increased payment options and double up payments. Please contact me for further information regarding this topic.
What is my penalty if I sell/refinance before my term is up
There are 2 options for penalties. The only way to avoid these is if you have a line of credit or an open mortgage. These often come with higher interest rates though.
3 month interest penalty = The penalty on all variable mortgages as well as certain situations for fixed mortgages. This penalty is just calculated on what the interest cost is for 3 months on your mortgage. On a variable mortgage it is based on 3 months interest based at prime rate on the size of your mortgage.
IRD (interest rate differential) = This penalty is on fixed rate mortgages and is based on the different between your rate and what the bank could re-lend that money out if you were to pay out your mortgage. If rates have come down since you locked into a fixed rate, the lender will have to re-lend that money at a lower rate once you pay it back so they basically charge you the interest that they will be losing on that money. If rates have gone up since you fixed your mortgage then you will often jsut be charged 3 months interest penalty because they will be able to relend the money at a higher rate anyways.
How to use your RRSP’s as your down payment
You can use RRSP’s as a downpayment for up to $25,000. This basically means you will be able to save up a downpayment more quickly because it will have been non taxible money that you have saved. You will have to pay the money back to your RRSP’s after the fact to avoid being taxed on that money you used but they let you pay it back over a very long period of time. This can always be done on your first purchase as well as other purchases but only under certain circumstances. Please contract myself or an investment specialist for more information on this.
Coming soon.
Mortgage Glossary
Coming soon.
